Each time you turn over a rental unit, you increase your operating costs. Lost rental income, unscheduled upgrades, cleaning, and repairs require labor and expense, and then you have the task of advertising your unit and screening potential clients. Turnover is a drag, but in an industry that mostly caters to people in transition, what can we do?
First, we can change our mindset and recognize that times are changing... and so are our opportunities.
More and more Americans are choosing to rent rather than purchase, largely in part to unstable interest rates and housing markets. In order to reduce monthly mortgage payments, would-be homebuyers have to put down extremely large down payments and are still saddled with maintenance costs, unpredictable property taxes, higher insurance rates, and fewer options in selecting their ideal location. Millennials are mistrustful of lending institutions, having grown up during the Great Recession, and downsizing empty-nesters might not afford current housing prices... and aren't ready to take on a new mortgage.
People once said that the money they spent on rent was money they were throwing out the window. Now, those same people are realizing the value in renting long-term. This means you have a broader market, and the ability to rent to high-quality, stable tenants.
Now, you just have to reach them, and appeal to their needs.
1. Targeted Marketing
Your ideal tenants are tech-savvy and tend to do most of their shopping online. Be sure to advertise your rental on website and app-based listing platforms such as Trulia, Zillow, and Craigslist. If you operate a large, multi-unit property, consider posting your ads and flyers in locations frequented by your ideal markets.
2. Offer Financial Incentives
Advertise rewards for long-term lease agreements, with discounted rent available to tenants who choose to stay beyond the initial lease period. You might even offer to freeze your rent increases for a period of time after the lease expires. You want renters who will provide you stability, and in order to get them, you'll want to reciprocate.
3. Consider Allowing Pets
Landlords are extremely resistant to allowing animals, which is why you might want to consider renting to a responsible pet owner. If you lay down specific ground rules and ask for a larger deposit, the long-term benefits might outweigh the costs of any damage to your property. Here are some tips:
- Require dogs to pass the AKC Canine Good Citizen Test
- Prohibit breeds that aren't covered by your insurance policy
- Require that cats and dogs are spayed and neutered
- Upgrade your flooring to laminate or tile (a good investment anyway)
- Require quarterly inspections until you're satisfied the pet isn't a problem.
Tenants with pets aren't appropriate to all situations, especially in high-density properties without easy access to dog walking areas. But owners of well-trained pets tend to be stable tenants, and what's more, they'll place a higher value on their rental arrangement. After all, you're one of the few landlords willing to take a chance.
4. Screen Carefully... and Fairly
You're already aware of rules that prohibit discrimination. Within the bounds of the law, however, you have the right to choose the best tenants for your property, your rental community, and your bottom line. Order a comprehensive background check, contact their prior landlords, and pay attention to their credit history. Don't make concessions simply because you "click" with a potential candidate.
- Does their monthly income total at least three times the rental fee?
- Do they have a history of frequent moving and job-hopping?
- Would their former landlords rent to them again in the future? If not, why?
- Are they clean and composed, and do they conduct themselves professionally?
- When you call their personal references, do they seem genuine, articulate, and appropriately enthusiastic about their endorsement?
Don't be in a hurry to sign a potential tenant. Be thorough with every candidate you consider, because appearances can be deceiving. You might think you've found a possible new best friend in a potential client, only to end up with a contentious problem you're bound to deal with for the duration of their lease.
5. Offer Tenant Improvements
Close the deal on your dream client and keep them around longer by offering to upgrade your unit to better meet the tenant's needs. Tenant improvements are permanent alterations to a property that increase value to the unit while enticing your tenant to sign a longer lease (or pay more each month.) Examples of residential tenant improvements include:
- Additional power outlets and cable jacks
- "Smart" home systems
- Security upgrades (door locks and frames, keypad entry, alarm systems)
- New, modern appliances
- New flooring, fixtures, and countertops
- Custom accessibility features
- Landscaping features (typically low-maintenance) and privacy fences
You might have been planning on making these upgrades anyway, but if your tenant thinks of them as special concessions, they'll be more inclined to sign that lease... and give you access to finish those upgrades while the unit's occupied and generating income.
6. Offer Built-In, Value-Added Services
Do you operate multiple units? Negotiate with reputable, screened housekeeping, carpet-cleaning, and landscaping companies for discounts, and offer a home-maintenance plan in which fees for scheduled services are added to the monthly rent. This way, you have control over who helps maintain your units, and your customers will be less likely to neglect your property. Be sure to let them opt-out if they're uncomfortable having strangers in their home; this should be perceived as a value-added service rather than an intrusion.
7. Be Responsive to Emergencies & Repair Requests
If your tenant requests a repair, or a minor disaster occurs due to a broken pipe or appliance, be prepared to make things right without delay. Keep a list of trusted, specialized repair professionals handy, and allow your tenants the option of calling them directly if it's easier for them to do so.
8. Build a Community
If you have a multi-unit property, find out how you can foster a sense of community while bettering the neighborhood. Create a sign-up sheet for a local beautification project, host blood drives, and hold events and outings. Tenants aren't as likely to leave if they've established positive relationships with their neighbors, and tight communities help reduce crime in neighborhoods.
9. Maintain the Property
This should be a given, but too many landlords consider their rental enterprise as "passive income". Head off emergencies by regularly inspecting HVAC, plumbing, and wiring systems, scheduling regular pest control visits, and bringing in landscape professionals to make sure trees aren't posing a problem to structures or overhead wires. Paint, repair roofs, and monitor walkways for safety, and if your tenants are responsible for basic maintenance, check in with them to ensure they're keeping up with gutters, exteriors, and furnace filters.
10. Keep In Touch
Check in with your tenants on a monthly basis to find out if they need anything from you. Encourage them to let you know if other tenants are causing problems, and make sure they're comfortable asking you to make reasonable changes to their unit. Landlords should think of themselves as customer service professionals because tenant satisfaction is key to reducing turnover.
11. Reward Good Tenants
Has your tenant paid their rent before the due date every month for a year? Did they single-handedly organize a potluck for your building's residents? Maybe a tenant at one of your single-family rentals supervised a valuable upgrade to the property at your request. Show your appreciation with rebates, concert tickets, or gift certificates for a local restaurant.
12. Hold Up Your End of the Bargain
Good communication and ethical business practices establish trust between landlords and tenants. Don't make promises you're not willing and able to fulfill, and be sure to choose tenants you feel will both benefit from and contribute to their partnership with you. The landlord-tenant relationship should be transparent and mutually-satisfying, and it's up to you to do your part.
What's Your Strategy for Reducing Tenant Turnover?
No matter if you're renting out a room above your garage or a unit in a 100-unit tower, you can't afford the high cost of frequent turnover. Take a look at what's worked for you in the past, and eliminate the practices you feel have contributed to your turnover rate. Which of the above tips can you implement right away, and which ones aren't suitable for your rental property type?
Whatever means you take to find and keep suitable long-term tenants, the market's on your side. Take advantage of it to protect your bottom line and increase your enjoyment of life as a landlord. And don't forget to join VerticalRent for more resources to enhance your success.
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